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Tax Season Tips for Landlords

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tax season tips

With the tax season approaching, rental owners are mandated to report their rental income on their tax returns. Under the IRS’s guidelines, rental income is defined as the payment received from the occupants of your rental. It also covers:

  • Regularly paid rent
  • Advanced paid rent
  • Security deposits
  • Fees paid by a renter for lease cancellation
  • Expenses paid by a tenant
  • Property or services received in lieu of money as rent payment

Taxes can be overwhelming for both new and experienced landlords alike. What’s more, committing a tax error can have a serious impact on your rental business. With the rising rental rates, expiry of eviction moratoriums, and financial uncertainties ahead, it will serve property investors well to learn tips to save on taxes and maximize deductions. 

Here are ways to keep more of your rental income in your account:

Main Tax Deductions for Landlords

As a landlord, it benefits you to be aware of what comprises the Internal Revenue Services (IRS) deductions. This helps you save more when filing. Some of these legitimate deductions are:

  • Rental property depreciation – If you have owned your rental for some time, you’re allowed to reclaim some of your real estate investment cost. You can subtract a part of your property’s expense over time.
  • Insurance costs – The premium you’re paying in your property’s insurance is deductible. This covers things such as landlord liability insurance and flood insurance. As a landlord, you’re permitted to deduct some of your insurance expenses.
filing during tax season
  • Repair charges – Property damage is inevitable and it can be caused by tenants or landlords. Luckily, repair fees are deductible in the specific year that it was done. It’s important to note that repairs are only deductible if they’re categorized as essential. Examples of relevant repairs are repainting your rental unit, replacing the broken windows, and fixing the gutters.

These are just some of the allowable deductions from your rental unit that you can file a claim on.

COVID Resources

Plenty of landlords have altered their practices especially when it comes to performing property showings. Most adopted the virtual property tour procedure to maintain social distance. Still, landlords are exposed to uncertainty even if normalcy is beginning to return little by little. 

Rental rates, evictions, and tenant turnovers remain largely unpredictable. Research conducted by the Harvard Center for Housing Studies shows that independent landlords managing small rentals only gained around 50% of the normal rental income as the pandemic carried on.

In 2021, there was a distribution of the COVID-19 relief package totaling $25 billion set aside for rental assistance. This permitted landlords to send fund applications on behalf of their renters. By visiting, landlords can readily access a list of resources that can support them after the COVID-19 fallout. You can discover plenty of webinars, news sources, and forms detailing the challenges presented in 2021 and 2022.

tax deductions for landlords

Necessary Landlord Records for Tax Season

Record-keeping is essential when you own a rental property. If you have all of your documents sorted out, tax season will be a walk in the park. It’s best to prepare important rental files such as receipts. This makes it easy to complete your tax returns and review for deductible costs. Some of the records that should be organized and within your reach while filing are the following:

  • Tenant’s leasing agreement copies for all rental units
  • Legal documents that include reports of property inspections, fines, and court appearance
  • Property permits
  • Records related to the business
  • Insurance policies
  • Loan paperwork
  • Record of taxes filed over time
  • Real estate investment documents such as property deeds or titles

Other required documents aside from the list above include short-term records. This refers to income and expense reports generated from the latest tax year. These short-term records are:

  • Interest on a mortgage
  • Legal costs that cover the Attorney’s fees 
  • Receipts of repair performed
  • Receipts of paid rent
  • Receipt of utility payment (if it applies)
  • Advertising fees including listing expenses
  • Rental business credit cards

It may sound difficult to keep track and store a lot of documents but having them all in one place can help reduce stress and confusion come tax season. 

Filing Taxes According to Ownership Status

When filing taxes, landlords need to check the rental property ownership status.

Rentals Owned by Individuals

Individuals who own the rental property need to file the IRS Schedule E, Supplemental Income and Loss to state the rent income and expenses.

property ownership and taxation

Co-owning a Rental Property 

This requires separate reporting from each owner. It depends on income shares and the rental property deduction of each individual’s tax return. You must file the IRS Schedule E, Supplemental Income and Loss. Partners, on the other hand, can determine the owner’s share through the ownership interest stated on the property deed.

Business Entities who Own a Rental 

One should file the Internal Revenue Service (IRS) Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation to report the income and deductions. Depending on the type of business entity, more requirements and documents are expected to be submitted.

Bottom Line

As a landlord who wants to keep most of your earnings, knowing about tax deductions is incredibly beneficial. However, landlords also have the option to hire a trusted property management company who have a great handle on tax return filing. Experienced property managers, like those at Realty Management Associates, can help with tax filings and provide organized financial reports. 

We also offer a complete range of useful property management services such as filling property vacancies, collecting rent promptly, following a detailed tenant screening procedure and maintaining your rental units.  

Engaging our services means we can support you during challenging periods, help you gain peace of mind, and advise you on how to maximize your ROI. Contact us today to learn more about our property management services!